Penguin and Random House in merger talks

On Thursday, the Financial Timesreported that Random House and Penguin’s parent companies, Pearson and Bertelsmann, are in talks about merging the two publishers. (The FT is also owned by Pearson.) Now Pearson has released a statement confirming the report:

“Pearson notes recent media coverage regarding Penguin, its consumer publishing division, and Random House (part of Bertelsmann). Pearson confirms that it is discussing with Bertelsmann a possible combination of Penguin and Random House. The two companies have not reached agreement and there is no certainty that the discussions will lead to a transaction. A further announcement will be made if and when appropriate.”

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Random House is the world’s largest book publisher, publishing around 10,000 books a year. Its 2011 revenues (PDF) were €1.75 billion (USD $2.27 billion). Penguin publishes over 4,000 books a year and had 2011 revenues (PDF) of £1.05 billion (USD $1.7 billion). A merger would create a global book publishing powerhouse with a presence in the fast-developing digital markets China, India and Brazil.

Many in the industry have long wondered when two of the big-six publishers would merge, but I don’t think anyone expected Penguin or Random House to go first. It has seemed much more likely that HarperCollins (s NWS) or Simon & Schuster (s CBS) would be sold (which is of course still a possibility), since neither News Corp nor CBS places a high priority on book publishing and News Corp is spinning off its publishing and educational assets.

The FT, citing “three people familiar with the negotiations,” reported that the companies were discussing “a merger in which Bertelsmann would have a stake of more than 50 percent” but offered few other details other than that, if a merger went through, “both Markus Dohle, chief executive of Random House, and John Makinson, chief executive of Penguin, are expected to take senior leadership roles.” As the FT notes, a merger could face difficulty gaining regulatory approval.